Tag Archives: Trustee

Estate Planning

Selecting the Right Trustee

A typical misconception about estate planning is that people who are considered older should be concerned with them and that there is always time to go and create a will or trust. The problem with that thought process is that estate plans are much more than the passing of assets to another person. Estate plans can include the power to make decisions for a person regarding health concerns if said person is incapacitated or is unable voice the decision themselves. This is typically an overlooked aspect of estate planning and actually is a very important one in the case of a car accident or maybe a work related injury. Some may argue that one can go make the health care power of attorney if something was to happen, but may forget that if a person is incapacitated they will not be able to create this document. In addition, if an emergency is to occur, it is normal to be in a frazzled state and not think things through clearly before making important documents. Because of these mentioned reasons, it is a very important decision to set up a very precise health care power of attorney and make sure that your health and life is protected in case of an emergency.

The other side of estate planning that younger individuals do not typically think about are wills and trusts to protect the assets that they have. Homes, bank accounts, automobiles, burial expenses are the items people correlate to wills and trusts, but social media accounts and smaller personal belongings is what is left out of that thought process. They may seem minuscule and unimportant, but should be taken care of to make sure that they go into the correct hands. Everything of slight importance could be and should be mentioned in a will so that nothing is left to chance. Also, younger people without a great deal of assets tend to believe that their assets will always be placed in the hands of their spouse or maybe parents, which ends up not being true. It is always beneficial to have a will or trust set up, even for a small amount of assets, so that the assets are distributed to the correct people and survivors do not have to go through a tedious process which occurs when there is no estate plan. In addition, assets that have been obtained after the will or trust has been established can always be added to the documents, so that they are protected as well.

A very important aspect of estate planning that usually is not mentioned in articles is the actual picking of the trustee and how to make sure you have chosen the correct person. The questions that should be asked to picking a trustee are as follows:

–         Does he or she have the experience and knowledge to manage complicated financial affairs in a competent and knowledgeable manner?

–         If he or she must make a decision that may affect family members, will they act in a fair and unbiased manner?

–         Will naming a family member as trustee create tension between family members?

–         Does the prospective trustee have the time to manage your trust and will do so without rushing?

–         Does he or she want this important responsibility?

–         Is there another person in mind to serve as trustee if the trustee selected can’t do it?

These questions should be thought about with the uttermost care and should be discussed with a third party to get a second opinion on the potential choice of the trustee. An attorney could help make the correct choice of a trustee because they would be unbiased. Please contact attorney Anthony Marinaccio at 818-839-5220 with any questions.

Estate Planning, Real Estate

Probate, Inheritances, and Property Taxes

The title to the article sums up USA Today’s article Divorce, Death, and Donald Sterling’s Boyhood Home. The article describes several properties in Boyle Heights still owned by Donald Sterling’s deceased mother and grandmother.

In California, property taxes are determined by “assessed value,” which is derived from the fair market value of a property at the time it changes ownership. For example, a property purchased in the 1970s will have a low assessed value because it was purchased at a lower price than it would receive today.

If you sell a property, it will get reassessed, but there are often questions whether a property will be reassessed if you want to leave the property to your children, grandchildren, other relatives, or friends.

Generally, a transfer from a parent to a child does not trigger a reassessment. There is no limit to transfers of a primary residence; however, there is a $1 million limit to other properties. A transfer can be the result of a gift, a sale, or an inheritance. It can also be through a trust.

A child for purposes of the property tax exclusion includes:

  • Any child born of the parent(s)
  • Any stepchild while the relationship of stepparent and stepchild exists.
  • Any son-in-law or daughter-in-law of the parent(s)
  • Any adopted child who was adopted before the age of 18

Further, a grandchild could be considered a “child” for purposes of a property tax exclusion if the child of the transferor has died along with the spouse of that child.

The California Board of Equalization has an FAQ’s that provides a lot of information regarding the parent-child exclusion for the property tax.

Estate Planning

Arbitration Provision Not Enforceable to Dispute Validity of Trust

In a recent decision, a California court found that an arbitration provision in a living trust could not be enforced when the beneficiaries were disputing the validity of the trust document. McArthur v. McArthur was a case of first impression in California and is important for all those with a trust to understand that an arbitration provision may not be valid.

In 2001, Frances McArthur created the Frances E. McArthur 2001 Living Trust providing that her estate would be divided equally among her three daughters. In 2011, the trust was amended giving one daughter a larger share of Frances’ estate, named that same daughter as co-trustee, and added a “Christian Dispute Resolution” clause requiring mediation and arbitration for any dispute arising out of  the trust.

Soon after the amendments were made, Frances died. One daughter who received a smaller share of her mother’s estate filed a lawsuit claiming elder abuse against the daughter receiving the larger share. A motion to compel arbitration was filed, and the trial court denied the motion because an arbitration clause that requires arbitration for a dispute requires consent among all parties, such as in a binding agreement.

On appeal, the Court found that arbitration clauses generally require the consent of all parties involved. Although an arbitration clause has been found valid in a CC&R of a HOA even though the homeowner did not actually consent to the CC&R, the Court found that ultimately the homeowner consented to purchasing a property with a CC&R and should have known about the arbitration provision.

The Court found that a beneficiary of a trust did not consent to the arbitration provision found in the trust. Although a trust can be interpreted similar to a contract; however, California law generally finds a contractual relationship between the settlor and trustee not with the beneficiaries.

Thus the Court found that a beneficiary alleging a trust was not valid was not compelled to submit to arbitration but could continue the dispute in court. This case has an important effect on beneficiaries disputing the validity of the trust; however, it is also limited because an arbitration clause may still be enforceable for other disputes.

Estate Planning

Mistakes in Philip Seymour Hoffman’s Estate Planning

Celebrity deaths are often followed by a very public battle between heirs over the celebrity’s assets, fame, and residual income. This CNBC article entitled “Here’s Why Philip Seymour Hoffman’s Will is a ‘Mess’” helps others not make the same mistakes.

Mistake Number 1

Hoffman’s will is over a decade old. Wills should be changing documents because life changes. After major life changes, a will and your entire estate plan, should be reviewed to determine if any changes are necessary. Hoffman’s will left his estate to his long time girlfriend and mother of his children, Marianne O’Donnell.

Hoffman’s will may only mention his one daughter that was born at the time. After he wrote his will, he had two additional children. In California, a child born after a parent’s will is executed is entitled to the child’s intestate share; however, there are exceptions and this statutory provision should not be relied upon to allow all your children to inherit your estate.

This was probably the biggest mistake in Hoffman’s estate planning because it will create uncertainty and could create a battle between siblings for their shares of Hoffman’s estate.

Mistake Number 2

Hoffman’s estate plan did not take into account estate and other taxes. Because he left the bulk of his estate to his girlfriend, she will still need to pay estate taxes. If the couple were married, she could have inherited his estate tax free. The number is huge . . . O’Donnell may need to pay up to $11.9 million of a $35 million estate, nearly 1/3 of the estate!

There could have been a few ways to avoid the large estate tax bill, including creating trusts for his girlfriend or purchasing a life insurance policy to help pay for the estate tax bill. However, perhaps the best way to avoid the large estate tax bill would have been for the couple to have been married.

Mistake Number 3

Hoffman created a trust for his one child (the one born before he wrote his will). The trust gives all assets to the child when the child turns 30. Because of the size of Hoffman’s estate, it may have been better to keep the trust and not provide an outright gift of all assets at a certain age because upon 30, Hoffman’s estate to his child will not be protected from creditors, liens, judgments, or ex-spouses. It is important to note that are ways to create trusts for beneficiaries in order for them to be protected from creditors or reckless spending.

Although Hoffman had an estate plan unlike some other famous celebrities who have recently died, the fact that it had not been updated in ten years makes it problematic for several reasons along with the huge estate tax bill that will now be owed.

Estate Planning

What We Can Learn From Actor Paul Walker’s Estate Plan

Forbes recently had an interesting article entitled Five Estate Planning Lessons from the Paul Walker Estate. It provides an interesting insight into the estate plan of the late actor that was valued at 25 million dollars. His untimely death at 40 years old also shows that estate planning can never be done too early. His first will was signed when he was 28 years old. 

Paul Walker had a revocable living trust, which is highly recommended for most people who would come to visit me for a consultation. His will left all his assets to his revocable living trust. In addition to avoiding the publicity and costs of probate, his revocable living trust greatly assists in passing assets to his fifteen year old child in a controlled fashion. Although we don’t know exactly what his revocable living trust says on giving assets to his child, a good estate plan for someone with significant assets will distribute assets to children in a controlled fashion and not simply give all assets to them when they turn 18.

As discussed in previous posts, having a revocable living trust is only the start. The revocable living trust must be funded with your property meaning that deeds for real estate must be transferred to the revocable living trust and personal property such as bank accounts, brokerage accounts, and individual stocks must be transferred to the name of the trust.

In addition to having the revocable living trust, you will also need a will. For individuals and couples with minor children, a will is the only method to name a guardian after your death. In Paul Walker’s case, he named his mother as the guardian for his daughter. Although a grandmother will not take custody rights over a parent, it is smart estate planning to name a back up if the need would arise.

Estate planning is not just for celebrities and those with significant assets. The issues raised by Paul Walker’s estate could arise in the average middle class family’s estate particularly when young children are involved.

Please contact Attorney Anthony Marinaccio at (818) 839-5220 to set up a free initial consultation to discuss your estate plan or amending your estate plan.

Estate Planning

Estate Planning Tips if You Have Minor Children

Estate planning is different for every age group and for every person; however, there are certain categories of persons that could especially benefit from estate planning. People with young children often do not think about estate planning as they are busy raising children, starting professions, and beginning “adult lives;” however having children should be a reason to have a basic estate plan if you do not have any major assets.

Without an estate plan, the State of California would decide who has guardianship rights over your children. Further, if you do have any property, your children may not be able to use your property for their benefit quickly. A will, a revocable living trust, a durable power of attorney, and an Advanced Healthcare Directive should be part of your estate plan in order for your children to have the best support and least uncertainty if you die while they are still minors.

The following provides a short list of some estate planning tips if you currently have children who are under 18 years old.

  • Consider naming a guardian for your children and a separate guardian to manage any property for your children. You do not need to choose one guardian to be in charge of your children and to be in charge of your children’s property. There are many reasons you may want two.
  • Name a dependable executor and/or trustee. An executor (for a will) and a trustee (for a trust) will be in charge of your assets after you die, so you would want to ensure they are dependable and knowledgeable. It does not need to be a family member, so you can choose whoever you want. You should also have a back up in the case the executor or trustee is unable to serve.
  • Designate beneficiaries to your retirement accounts. Retirement accounts (401(k)s, Roth IRAs, or IRAS) can be passed on to heirs by filling out a Beneficiary Designation Form provided by your employer or whoever is holding your retirement account (i.e., brokerage). You can change the beneficiaries at any time.
  • Consider insurance. Life insurance and/or disability insurance are methods to provide for children or your spouse in the case you are unable to care for them financially. Although less a legal issue and more a financial issue, it is important to consider when making an estate plan.
  • Have a will and/or revocable living trust. The most important tip for an estate plan is to have one. You would not want your family struggling after your death or need to fight for assets that you wanted to leave to them. Even if you do not have any assets, a will is important to name a guardian for your children.

Please contact Attorney Anthony Marinaccio if you would like to discuss your estate planning options at (818) 839-5220.